The number of Hong Kong-owned factories in the Pearl River Delta region has shrunk by a fifth since 2011. Photo: Reuters

Hong Kong factories on the mainland are bracing for more turbulence after the government revived the debate over collective bargaining.

A consultation paper on a system that would allow workers to negotiate contract terms with their employers was floated this week after a brief consultation in 2011. The Federation of Hong Kong Industries has responded by warning that if a collective bargaining system is implemented, it would add to the woes of Hong Kong manufacturers and force some of them out of business.

Already the number of Hong Kong factories in the Pearl River Delta has shrunk by a fifth to about 40,000 from 2011 because of an increase in labour costs and waning demand from the US and Europe, said Stanley Lau, the chairman of the association.

Collective bargaining has been discussed on the mainland for years but has never been implemented because of opposition from the private sector.

Based on the so-called Rainbow Plan notice jointly issued by the Ministry of Human Resources and Social Security and the All China Federation of Trade Union in May 2010, collective bargaining and collective contract schemes were meant to be implemented in all enterprises with trade unions by last year.

Guangdong issued its first Guidance on Enterprise Wage Collective Bargaining in August 2010, but never made it mandatory. The latest consultation paper, however, contains detailed instructions that employers have to abide by and bear the legal consequences of failing to do so.

"The employer will be asked to provide an array of financial documents to labour representatives, including the profit and loss account, tax payments and the social security provisions of the company," said Lau.

According to the consultation paper, the management would also have to respond to the union for talks within 20 days and sit down for negotiations within 60 days, or face criminal liability.

"Hong Kong factory owners are concerned about the loss of control and the potential rise in labour costs," Lau said, adding the body would lobby mainland and Hong Kong governments against collective bargaining.

The country's exports softened unexpectedly in September, falling 0.3 per cent year on year after rising in July and August. Exports are estimated to grow slowly.

There had been a few bright spots for manufacturers as the labour shortage showed signs of abating, said Lau.

The labour union fee levied on factories had also been reduced recently as the mechanism for calculating the levy was changed to basic salary instead of the actual salary, he added. Also, the use of the collected fee, which would be controlled solely by the union, is now monitored by employers and labour union.

This article appeared in the South China Morning Post print edition as Collective bargaining debate returns